Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/117958
Authors: 
Garratt, Rod
Qin, Cheng-Zhong
Parco, James E.
Rapoport, Amnon
Year of Publication: 
2004
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 82.2004
Abstract: 
A model of coalition government formation is presented in which inefficient, non-minimal winning coalitions may form in Nash equilibrium. Predictions for five games are presented and tested experimentally. The experimental data support potential maximization as a refinement of Nash equilibrium. In particular, the data support the prediction that non-minimal winning coalitions occur when the distance between policy positions of the parties is small relative to the value of forming the government. These conditions hold in games 1, 3, 4 and 5, where subjects played their unique potential-maximizing strategies 91, 52, 82 and 84 percent of the time, respectively. In the remaining game (Game 2) experimental data support the prediction of a minimal winning coalition. Players A and B played their unique potential-maximizing strategies 84 and 86 percent of the time, respectively, and the predicted minimal-winning government formed 92 percent of the time (all strategy choices for player C conform with potential maximization in Game 2). In Games 1, 2, 4 and 5 over 98 percent of the observed Nash equilibrium outcomes were those predicted by potential maximization. Other solution concepts including iterated elimination of dominated strategies and strong/coalition proof Nash equilibrium are also tested.
Subjects: 
Coalition formation
Potential maximization
Nash equilibrium refinements
Experimental study
Minimal winning
JEL: 
C72
C78
D72
Document Type: 
Working Paper

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